J.C. Penney: Lodi, Tracy stores to stay open

The news came one day after the financially troubled company announced it would shut down the JCPenney store in Stockton's Weberstown Mall at a cost of more than 160 jobs.

Company spokesman Tim Lyons would say only that the move to close the Stockton store is part of a sweeping, cost-cutting move. Lyons would not speculate about whether factors particular to the mall or to the Stockton market also played a role, referring those questions to the Stockton store.

Representatives at the Stockton store could not be reached Wednesday.

"In general, the stores on the list were stores that hadn't performed well in sales or in profits," Lyons said. "The retail market is very competitive right now. ... The closing of these stores is one of the ways we're addressing that and cutting costs and focusing assets where they are doing the most good for the company as a whole."

Weberstown Mall's marketing manager, Kelly Tallant, said the closing is unfortunate but "opens up all sorts of opportunities for retail growth in Stockton."

Tallant said mall management has not yet communicated with J.C. Penney officials but has deduced from the company's statement that the decision was a result of corporate restructuring rather than a fault of the Stockton store.

"Their overall performance in the mall has been good," she said.

She declined to comment on which prospective tenant or tenants the mall will target to fill the 180,000 square-foot space.

Industry experts speculate that the store's closing, which will happen on or before July 1, has little to do with the performance of the Stockton store or the health of Stockton's retail market.

"You can't take it as a mark against Stockton or Weberstown," said Gary Eastland, president of Central Valley Business Consultants, a marketing company in Stockton. The Weberstown store was "just one of the unlucky stores that didn't hit the (corporate quota, in my opinion."

"They may be doing well within their market, ... but J.C. Penney was trying to hit the quota for internal change."

Eastland, former assistant head of operations and assistant head of merchandising for the Florsheim shoe company, has had firsthand experience with corporate downsizing.

Mike Donaghy, manager of nearby Sherwood Mall, also speculated that the cost-cutting effort was probably made with companye profits rather than Stockton profits in mind.

"Stockton is a strong retail market, and I'm very surprised and shocked that Penney's would make the decision to leave. ... With all the redevelopment that's gone on at Weberstown over the years, it doesn't seem to make sense."

The move may actually come as a welcome change, Donaghy reasoned.

"Obviously anyone who's been in the JCPenney store ... can see that it's pretty tired," he said.

Weberstown has successfully filled several large spaces with the likes of Barnes Noble Booksellers and Gap Inc.'s Gap and Old Navy stores, he said.

The mall also managed to land Dillard's. It is the Arkansas-based retailer's only California store.

"When Weinstock's went out, Dillard's was a surprise at that point. There are a number of other retailers that aren't in California (that could come in."

Joel Herche, associate professor of marketing at University of the Pacific's Eberhardt School of Business, said retailers of all types are feeling pressure from e-commerce sales.

"The Web is so low-cost that you can have small, mom-and-pop outfits look just as big as Wal-Mart online. That's a big threat to not just Penney's but all these stores."

The Plano, Texas-based chain, experts say, was one of the first to jump into online sales and continues to market that side of the business aggressively.

A recent filing with the Securities and Exchange Commission reveals that Internet sales are a small segment of overall sales yet are among the fastest growing at the company.

Herche said the move might also be part of a strategy to appeal to a more upscale consumer.

The Lodi and Tracy markets may be perceived as more upscale than Stockton, he said. Moreover, nearby Dillard's and Macy's stores may be beating J.C. Penney at its own game, he said.

J.C. Penney was intially more aligned with discount stores but has shifted upscale with the spread of Wal-Mart and other big-box discounters, he said.

"Sears has taken on the (discounters more directly with cost cutting, but Penney's has been less defined with that," Herche said. "They've got to define a niche. They're probably looking away from the Wal-Mart type of model to the Macy's type of model."

But Eastland contends that Dillard's or Macy's wouldn't be valid reason for J.C. Penney to back out. Retailers like to cluster where similar stores have already carved out a customer base, he said.

"(Dillard's was a big signal that there's a good retail market in Stockton and for higher-end, softer goods," Eastland said.

The Lodi and Tracy stores are much newer and much smaller than the Stockton location. The Tracy store, at West Valley Mall, is about 50,000 square feet and opened in 1996. T

he Lodi store, at Sunwest Plaza, measures 33,000 square feet and opened in 1995.

J.C. Penney Co.'s Lyons said the company was expected to release a list Wednesday of stores being closed.

J.C. Penney Co. stock tumbled further from a 52-week low set Tuesday, falling three-eighths, to 137/8, in New York Stock Exchange trading Wednesday.

Also on Wednesday, Moody's Investors lowered J.C. Penney Co.'s debt ratings because of what the debt-rating service called a slump in the retailer's department-store business and problems at its Eckerd drugstore chain.

The ratings cuts affect about $6.8 billion of securities. Senior unsecured debt and medium-term notes were lowered to "Baa2" from "A3."

The company's senior unsecured shelf registration was cut to "(PBaa2" from "(PA3."